No change of opinion when there was no earlier scrutiny assessment-High Court

No change of opinion when there was no earlier scrutiny assessment, therefore, the reopening of assessment was not bad in law-High Court

ABCAUS Case Law Citation:
ABCAUS 2502 (2018) 09 HC

Important Case Laws Cited/relied upon by the parties:
GKN Driveshafts India Ltd., vs. ITO, 203-259-ITR-19

The present Petition was filed by the assessee challenging the proceedings initiated u/s 148 the Income Tax Act, 1961 (the Act) and rejecting the objection raised by the petitioner for reopening the assessment under Section 147 of the Act.

The AO issued notice under Section 148 of the Act, proposing to reopen the assessment stating that there exists reasons to believe that income chargeable to tax for the year had escaped assessment. Another notice was issued under Section 142(1) read with Section 129 of the Act calling for certain records.

During the proceedings, the petitioner made a request for furnishing of reasons for reopening of the assessment, which was refused to be accepted and on the same date the AO issued show cause notice calling upon the petitioner to show cause as to why the assessment should not be completed under Section 144.

 At that stage, the petitioner filed Writ Petition. However, the AO completed the assessment under Section 144 read with Section 147 of the Act. Therefore, the petitioner amended the prayer in the Writ Petition. Ultimately, the Writ Petition was disposed of by setting aside the order of assessment, with direction to the AO to furnish reasons for reopening of the assessment. The petitioner was directed to file objections and the AO was directed to redo the assessment by following the mandate laid down in GKN Driveshafts India Ltd. In response to the same, the petitioner submitted the objection which were rejected.

The instant Petition was filed  impugning the said order of rejection.

The Petitioner contended that the reopening was done based on the details furnished in the return of income and no new material or information was found to initiate reassessment proceedings, and as such on the basis of information gathered from the return, the only recourse available to the AO was to assess the petitioner under Section 143(3) or Section 144.

Further, it was submitted that when the petitioner filed return of income, showing agricultural income and the return having been accepted by the respondent, the Assessing Officer cannot invoke Section 147 of the Act and reopen the assessment, which is illegal, as it was a mere change of opinion and per se no tangible material is available for reopening the assessment.

The Hon’ble High Court noted that admittedly no scrutiny assessment under Section 143(3) was made and as per the annual information return received from the Bank and Sub-Registrars office, the petitioner had deposited cash and purchased immovable properties and the return of income filed by the assessee reflected receipt of agricultural income.

However, it was observed that there was no scrutiny assessment done for the relevant assessment year and the assessment itself was under Section 143(2). The Hon’ble High Court opined that in such circumstances, the assessee cannot claim that reopening cannot be done, as there were no fresh tangible materials or reasons for reopening. If the original assessment was a scrutiny assessment under Section 143(3) of the Act, the Court might have examined as to whether there were fresh tangible material for reopening the assessment or it is a case of change of opinion. Since there was no scrutiny assessment, the question of change of opinion does not arise and therefore, the contention raised by the petitioner that the reopening of assessment is bad in law, cannot be countenanced.

The Hon’ble High Court opined that the reopening of the assessment under Section 147 of the Act was perfectly legal and valid. The petitioner was directed to cooperate in the assessment proceedings.

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